The Office of the Comptroller of the Currency (OCC, a division of the US Treasury Dept.) recently came out with a consumer advisory report about Reverse Mortgages. If you remember, a few months ago, the head of the OCC, John Dugan, made one of the worst speeches ever and compared some Reverse Mortgages to subprime loans, so I was not expecting much from this report.
However, I was pleasantly suprised when I read it. The report is fair and except for two small complaints, it is accurate. Here is the link:
http://www.occ.gov/ftp/ADVISORY/2009-2.html
My only complaints are that 1) When it asks "Can I lose my Home?" it answers yes, before it explains the almost infinitesimally small chances of that happening (if taxes or insurance are not paid and there are no funds left in the loan to cover them, this does not happen often at all) AND 2) it says, and it is true that borrowers should not be persuaded as to how they should spend the proceeds, but why would they mention long term care insurance? How can someone buying LTC insurance be a bad thing?
HUD's absurd decision to cut every Home Equity Conversion Mortgage (HECM, the FHA Insured Reverse Mortgage Program) by 10% accross the board is one of the most insane decisions I have ever seen.
The background here is that the Congressional Budget Office decided a few months ago that, for the first time, the HECM program MAY produce a deficit in 2010 because of the drop in home values, and they asked congress to allocate an additional $800 million to the program. Keep in mind that this is complete conjecture because:
1) No one knows when any of these loans will terminate. (don't tell me about actuarial tables because most HECM's terminate by sale of the property and not death)
2) No one knows what the property values (or the overall Real Estate Market) will be when they terminate.
SO, to make every guessing moron happy, HUD decised to just reduce the loan amounts that people can get by 10% accross the board. This will cause millions of people not to qualify for enough to pay off their existing loans. Keep going and you can see how this will cause more foreclosures, more property value deterioration, etc. The vicious cycle continues.
Also, they gave the industry an entire WEEK to get our loans in process through the FHA system and keep the old loan amounts. Wasn't that generous of them? How about a month or two next time?
To say that I am pissed off is an understatement. This was shameful.
I will start posting regularly again next week For now, there is just too much for me to do to. Limits (loan amounts) got reduced by ten percent. Reverse Mortgages for Co-ops look like a reality starting January, and many other interesting things are going on, both good and bad. I'll post about them all as soon as I can.
Here is the link to the video
http://www.cnn.com/video/#/video/business/2009/08/29/nr.reverse.mortgages.cnn?iref=videosearch
The "Housing Expert" knows less about Reverse Mortgages than my five year old son. I cringed as almsot everything he said was incorrect. I'm used to negative pieces where the "expert" is wrong, but the tone of this one is pretty positive, just completely inaccurate.I'm used to negative pieces where the "expert" is wrong, but the tone of this one is pretty positive, just completely inaccurate.
Here's a few of the beauties that Clyde Anderson says:
1) A Reverse is not like a line of credit? Most Reverses have a line of credit
2) Have to own the home free and clear or owe very little? I have paid off $400,000 loans with a Reverse Mortgage
3) If the home is worth $200,000, you can pretty much get $200,000. No way Jose.
4) You {only} get paid monthly?
5) Pay it off only when you sell the property, What happens if the borrowers die?
6) Interest Free? I don't think so.
7) One of the cons is knowing that you can qualify for one?
This guy, like so many others who have gone on TV, Radio or written in a newspaper; just doesn't have the basic understanding of how a Reverse Mortgage works. He should have done a lot more research.
John Yedinak's Reverse Mortgage Daily Blog posted the National Reverse Mortgage Lender Association's (NRMLA) response to the deplorable article that Consumer Reports had in it this month about Reverse Mortgages. (I had posted the link to the article last week)
The response is long and detailed and deals with every inaccuracy and ommision. It is excellent and I hope someone at Consumer Reports has teh brains and guts to print a retraction or at least a response.
Here is the link:
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